Wealth Market Update - July 2021

Dear Client,

We hope you are enjoying the summer, especially with the province of Ontario having moved to Phase 3 of reopening in mid-July and some sense of normalcy returning to day-to-day life. As per COVID-19 Tracker data, ~70.4% of the population in the Ontario has received at least one dose and ~58.8% of the population is fully vaccinated. The number for Canada is equally as good at ~70.4% of the total population having received at least one dose and ~56.2% being fully vaccinated, as of this writing. Since our last update, the number for Canada’s fully vaccinated population has moved from ~27.71% to ~56.2%. By contrast, the number for the US’s fully vaccinated population has moved from ~46.3% to ~49.2% as per data from the Centre for Disease Control and Prevention (CDC).

Since the beginning of July, the 7-day moving average daily infection cases for Canada declined from ~620 per day to ~530 per day, and the 7-day moving average daily infection cases for the US increased from ~17k to ~57k as of this writing. The stock markets however fared better on the south of the border with the S&P 500 index continuing its advance while S&P TSX remained flat for the period. The spread of the highly contagious Delta variant and the news flow around high inflation has kept investors cautious, as evident from the choppy trading during the month.

Below we mention a few noteworthy developments over the last month.

Macroeconomic and market developments:

• In July, the S&P 500 index traded higher, led largely by the defensive Utilities, Real Estate, Healthcare, and Communications sectors along with the growth-oriented Information Technology sector faring better. The cyclical energy and financials sectors were the laggards on both sides of the borders. S&P TSX treaded water underpinned by the cyclical energy and financial sectors.

• The economic data released by the Bureau of Labor Statistics in the US indicated the inflation has increased from ~5% in May to 5.4% June while the unemployment rate inched back up to 5.9% from 5.8%. The corresponding figures for Canada were inflation declining from 3.6% in May to 3.1% in June and the unemployment rate declining from 8.2% in May to 7.8% in June as per Statistics Canada.

• Despite the higher inflation print, the US and Canada 10-yr government bond yields have declined by ~20 basis points since the start of the month providing support to the fixed-income asset class.

• The US Federal Reserve Chairman, Jerome Powell, maintained that most of the inflationary pressures are transitory and defended Fed’s loose monetary policy stance in front of the US Congress.

• In a press conference after the Federal Open Market Committee (FOMC) meeting, Jerome Powell said the economy has made progress, but it is not substantial enough to warrant tapering of Fed’s bond buying program.

• The crude oil prices witnessed a volatile month, as prices soared after talks among the OPEC+ (Organization of Petroleum Exporting Countries) on increasing the oil production broke down. However, the prices retreated later in the month after the OPEC and its allies resolved their differences and struck a deal to increase output.

How does this affect my investments?

The stock markets are inherently volatile and short-term market movements are impossible to predict. Historically, market declines have been followed by recoveries and new highs. By staying invested in a diversified portfolio, your portfolio will be well positioned to benefit from a recovery while mitigating the volatility experienced during the period.

If you have any questions about your investment portfolio, your advisor at O’Farrell Wealth and Estate Planning would be happy to discuss them with you.

Sincerely,

O’Farrell Wealth and Estate Planning